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Better for profits, Better for workers

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Better for profits, Better for workers

Results-Only Work Environments

byErin Cechon Friday, December 2, 2011 - 2:52pm

Employee turnover is expensive. Replacing employees who leave can cost businesses two times the annual compensation packages of those employees—costs which can balloon to three times the cost of the compensation to fill executive-level positions. What if there was an organizational policy that could not only significantly reduce employee turnover and boost businesses’ bottom lines, but also dramatically improve workers’ sense of work-life balance?

Sociologists Erin Kelly and Phyllis Moen might just have identified such a policy. Investigating an arrangement called “ROWE” (Results-Only Work Environments), Moen and Kelly found that ROWE reduced quitting rates by 46%. In other words, ROWE nearly cut in half the recruitment, hiring and training costs associated with turnover. The researchers also found that employees under ROWE were more likely than their colleagues in traditional arrangements to plan to stay with the company in the future.

How can a policy do that? This reduced turnover rate happened because employees under ROWE were happier with their work-life balance, felt less stressed about time management, and thus were more likely to stay.

"As long as the work gets done:" A bold experiment at Best Buy

The site of this success story is the corporate headquarters of the U.S. company Best Buy Co., Inc., which rolled out ROWE in stages to its more than 3500 headquarters employees. According to the creators of ROWE, the idea is simple: employees can do “whatever they want, when they want, wherever they want, as long as the work gets done.” Employees are taught to identify—and then clarify with their manager—the outcomes (or “results”) they are responsible for. As long as employees meet their expected outcomes, they can change when and where they work without asking permission from—or even notifying—their manager. Training sessions encourage employees to innovate new ways to promote the ROWE philosophy, such as cross-training with their team members so they can rotate off-site, or sending a couple of representatives to meetings in other departments rather than having everyone attend.

Kelly and Moen jumped at the chance to study the implementation of ROWE. Best Buy’s incremental policy change provided a unique opportunity to conduct a natural experiment: the researchers were able to compare the turnover rates of employees who transitioned to ROWE over a period of time to those who remained in traditional work arrangements. Kelly and Moen surveyed over 600 employees at Best Buy’s corporate headquarters right before ROWE was introduced to half the sample, and then again 6 months later. This is the first study of its kind to track the effects of policy changes unfolding over time, rather than studying them after the fact.

Redfining productivity

So what is the secret of ROWE’s success? Schedule control. Kelly explains that having control over the time and place of one’s work gives people the ability to more seamlessly manage their work and non-work responsibilities and to deal more efficiently with the ebb and flow of work deadlines, piano recitals, and doctor appointments. After just a few months, ROWErs felt less work-family conflict, had less “spillover” issues between their work and home lives, and had an improved sense of fit between their work and family lives, compared to their colleagues who continued under traditional work arrangements. Employees’ increased work-family balance is connected to a higher likelihood of staying at Best Buy.

To reap the full benefits of schedule control and see these effects on turnover, Best Buy also had to redefine productivity. “Prior to the implementation of ROWE, Best Buy, like most corporations, equated commitment and productivity with long hours spent at one’s desk or in meetings.” But, under ROWE, “long hours in the office and seeming to be busy are no longer regarded as signals of commitment or productivity.” Without cultural change, pressures to conform to “face time” measures of productivity may discourage employees from fully utilizing ROWE’s schedule control thus reduce the effectiveness of schedule control on turnover rates. Such culture shifts reduce the risk that individual employees who work nontraditional hours will be penalized.

Redefining productivity also means redefining management. Overseeing employees without relying on “face time” as a yardstick of productivity requires a new skill set and worldview: managers are no longer monitors; they must work together with employees to define and then evaluate productivity in the language of results.

The enormous upshot of this policy change is that it reduced turnover for everyone. Regardless of age, gender, occupational level, or tenure, employees under ROWE had lower turnover than employees under traditional work arrangements.

Better for women, better for business

In the long run, ROWE-type policies could be particularly important for retaining women employees. The work-life conflict that leads to turnover haunts many U.S. white-collar workers, but it is particularly pernicious among women with small children. Recent gender research has shown that working mothers face the burden of an increasingly stressful and time-consuming work life and often shoulder the lion’s share of family caretaking responsibilities. Among dual-earning families strapped for time, traditional solutions to the work-family balance conundrum often reinforces gender inequality: women, far more than men, are the ones who leave their jobs or cut back on their hours. Thus, Kelly notes, ROWE can not only reduce turnover costs associated with women being pushed out of the workforce by these family burdens, but could also be “especially useful in breaking down the gendered underpinnings of organizations that have systematically but subtly disadvantaged women and particularly mothers.”

Skeptics might see ROWE as a scheme to allow employees to do less work. After all, if employees aren’t in the office, how do we know whether they’re working? Managers under ROWE may feel like they are losing control over their workers. This is where that new definitions of productivity and management come in—if employees are producing high-quality results, does it matter when and where they do their work? Other research has found that ROWE-type arrangements actually boost team productivity and effectiveness. Cisco even claimed that increased productivity resulting from its rollout of a similar policy in 2003 saved the company $195 million.

Can other organizations replicate Best Buy’s success? Kelly and colleagues suggest that white-collar organizations could implement similar practices to the same effect. ROWE policies might also be applied to low-wage workers, but would necessarily be manifested differently. Kelly suggests that low-wage workers should get schedule control as well, in the form of more predictable weekly schedules, being allowed to swap their schedules more easily, and having the ability to refuse overtime. Implementing schedule control might be particularly profitable for companies who experience high turnover rates of their entry-level workers.

Kelly notes, schedule control “shouldn't be understood as a privilege or an accommodation that is just available to a few people who have already proven themselves to their employers. Our research shows that restructuring workplaces so that flexibility is the norm and managers and employees focus more on the work than on the schedule benefits both employees and the employer.” ROWE is an important example of policy innovations that might truly be win-win.

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Dr. Erin Kelly is an associate professor of sociology at the University of Minnesota and a member of the Clayman Institute’s new working group on Redesigning and Redefining Work. She and Dr. Phyllis Moen, McKnight Presidential Chair in sociology at the University of Minnesota, co-directed this research. Both are affiliates of the Minnesota Population Center. Their collaborators include Rachelle Hill (also at the University of Minnesota) and Eric Tranby at the University of Delaware. More information on their research can be found at www.flexiblework.umn.edu. ROWE was developed by Cali Ressler and Jody Thompson; see their website at www.goROWE.com.

This article was written by Erin Cech, a Postdoctoral Research Fellow at the Clayman Institute. Erin Cech holds a Ph.D. in Sociology from the University of California, San Diego, and B.S. degrees in Electrical Engineering and Sociology from Montana State University.